Shipbuilders Struggle Over Steel

September 6, 2006

Shipbuilders and Japanese steelmakers are struggling to hammer out the differences on steel plate prices as the sellers insist on a 17 percent raise to $680 per metric ton.
Korean shipbuilders including Hyundai Heavy Industries Co. are demanding a price cut from the current $580 to $480 per metric ton for the six months from October.
"The talks (on price settlement) could go on until early October," said an official from the Korea Shipbuilders' Association. "Steel plate supply is falling short of the soaring demand for ships."
Steelmakers are pushing to lift prices in the face of rising material costs. Prices of iron ore, the key material for steel, continued to climb 17 percent this year, after jumping 71.5 percent in 2005 as a result of oligopoly trading by global iron ore miners and burgeoning demand from China.
As for shipbuilders, sufficient procurement of steel plates is a must to satisfy orders in time. Steel plates account for up to 20 percent of total shipbuilding costs.
Korean shipbuilders' price settlement with Japanese steelmakers, usually followed by similar deals with POSCO(PKX) and smaller domestic companies, hit the peak of $680 per ton a year ago for orders received during the six months to March this year.
Nearly 30 percent of the steel plates used by the world's three largest shipyards depend on imports from Japan. Hyundai Heavy, Samsung Heavy and Daewoo Shipbuilding & Marine Engineering Co. estimate Japanese imports of 1 million tons, 500,000 tons and 150,000 tons, respectively, this year. Another 10 percent comes from China.
Hyundai Steel Co. targets to reach an annual production capacity of 2 million tons by 2009. The national production volume is forecast to grow from the current 6 million tons to 10.6 million tons by 2009.
Hyundai Heavy said it buys roughly 55 percent of its steel plates from domestic shipbuilders such as POSCO and Dongkuk.
(Source: www.koreaherald.co.kr)

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